Illinois pension reform proposal under scrutiny

Nearly two dozen Illinois House members were frustrated by the lack of progress on a pension reform plan coming from the state's top leaders.

Doug Finke

Nearly two dozen Illinois House members were frustrated by the lack of progress on a pension reform plan coming from the state's top leaders.

They decided to come up with their own plan, one they said incorporates the best pension reform ideas floated so far. They put their plan on the table last week for lawmakers and interest groups to mull before legislators return for a lame-duck session in early January.

Whether the plan will finally spur passage of pension reforms and ease the state's crushing pension obligations is uncertain.

"I'm grateful there's another idea on the table," said Senate Minority Leader Christine Radogno, R-Lemont, before adding, "From what I understand, there's not a lot of brand-new ideas in it."

Gov. Pat Quinn called the new plan "a very interesting proposal" and renewed his call for lawmakers to pass pension reforms before Jan. 9, when newly elected legislators are seated.

"After the new General Assembly is sworn in, we'll have a number of new faces," said Sen. John Sullivan, D-Rushville. "These are people who may or may not be as familiar with this issue."

Action needed

With pension costs increasing by $17 million a day, according to Quinn's estimates, Sullivan said lawmakers need to act sooner rather than later. Radogno agrees lawmakers need to act quickly, but that doesn't necessarily mean before a new Legislature is sworn in.

It's not going to pass until people's concerns have been satisfied," she said.

Those concerns run the gamut from whether the changes being discussed can pass a constitutional challenge to the inclusion of a gradual cost-shift of downstate teacher pension costs to local districts.

Senate President John Cullerton, D-Chicago, has said offering employees an option - like trading retiree health insurance for compounded cost-of-living pension increases - improves the chances a pension reform plan will be found constitutional by the courts. But the proposal submitted last week offers no such choice.

The House members' legislation would control COLAs - identified as the largest factor in increasing pension costs - by capping the retirement benefit to which they apply. For workers covered by Social Security, only the first $20,000 in pension benefits would be eligible for a COLA. For those not covered by Social Security, the amount is $25,000. In both cases, the COLAs compound.

Anxious about choices

Rep. Elaine Nekritz, D-Northbrook, a principal architect of the new proposal, said offering a choice posed a problem for workers and retirees.

"We heard a lot of anxiety about that choice - how do I possibly know what the future is going to bring to know whether I will need the health care or how do I make the financial calculation in order to choose?" she said.

That, in turn, called into question how much the state might expect to save by forcing people to choose between retirement COLAs or insurance.

"Both of those combined led us to say let's see if we can find a different path," she said.

Right after the plan was introduced, Cullerton issued a statement raising concerns about whether it is constitutional.

Nekritz said she thinks the plan could survive a court challenge because it includes a mechanism forcing the state to make its required pension contribution. The single largest factor in the state's $96 billion pension debt is the failure of the state to make its required contribution.

"The funding guarantee is something state employees and teachers don't enjoy right now, clearly," she said. "By locking that in, we make this constitutional."

But Nekritz also noted that no one can be sure how the state Supreme Court - where pension reform legislation of any kind will certainly end - will rule on pension changes.

The reform plan still includes shifting future downstate teacher pension costs to local districts, although it does it more gradually than other cost-shift proposals. The plan also includes a new type of retirement plan for downstate teachers and university workers, called a cash balance plan. The plan combines features of a defined benefit plan, which is what the state has now, and a defined contribution plan, better known as a 401(k).

Rep. Daniel Biss, D-Evanston, said the state would set a minimum benefit, but school districts would have latitude after that to determine benefits and their costs to the districts.

Rep. David Harris, R-Arlington Heights, one of two Republican co-sponsors of House Bill 6258, said school superintendents in his district told him they could live with a cost shift if it were done gradually enough.

"Personally, I don't think the cost shift in and of itself is the total stumbling block," he said.

No cookie-cutter

Sullivan, though, said some school districts are better able to afford a cost shift than others. For example, he said, many schools in his Senate district are squeezed by high transportation costs that aren't faced by geographically smaller school districts.

"You can't assume every district has the same finances," he said. "It's not a cookie-cutter approach."

Nekritz, Biss and others who developed the new plan touted the fact that Republicans like Harris have signed on to support it. However, Rep. Darlene Senger, R-Naperville, said she learned of the bill only a few days before it was introduced.

"We had a conversation (a week ago) Thursday, we had a conversation Monday afternoon, and that's pretty much the discussion we've had," Senger said. "To really say this is something that's bipartisan is really not the case."

Senger said she still doesn't like the idea of the cost shift and said no one knows just how much the bill would save the state in pension costs.

One issue that drove talks on the latest reform package, participants said, was the goal of protecting the smaller pensions earned by most retirees while also saving the state money. News reports often focus on outsized pensions earned by a few or when loopholes are exploited to enhance public pensions, but most people don't fit in those categories, they said.

"The average public employee pension is $32,000," said Rep. Kelly Cassidy, D-Chicago. "Every proposal we've seen so far has had a one-size-fits-all approach. This plan protects those at the lower end of the income scale and those who are closer to retirement."

Staff writer Chris Wetterich contributed to this report. Doug Finke can be reached at 788-1527.